Commodities

Here’s something to chew on. Not a single detached new home was sold during September on the west side of Vancouver. Until just weeks ago, this was arguably the hottest housing hood in the nation.

Of course, BC’s great HST flip-flop has something to do with that. Now that the province has announced it will kill the tax, which applies to new builds over half a million (for that, in VanCity, you get an ‘It’s My Potty” and an empty Best Buy box) construction has all but stopped as buyers wait for the levy to disappear. But that’s more than a year away. As you might imagine, it’s a disaster.

However, we’re talkin’ Van west here, where shacks on so-so-lots get $2 million and particle board McMansions have commanded twice that. Does a horny rich, jet-lagged Asian laying down four mill really care about a few hundred thousand more in tax? Or was all that HAM hype of last Spring just that? Realtor-created, media-infused, jingoistic marketing crap?

That’s what this pathetic blog alleged at the time, giving the razzberry to that Key Marketing nimrod in Vancouver who hired a copter, loaded it with ethnic Chinese realtors from Richmond and then conned the media into thinking it was Air Beijing. When it buzzed White Rock, Global TV had an orgasm.

But enough about Vancouver and the Lower Mainland. We’ll all get more interested in it as the body count rises.

Instead, a few words following up on yesterday’s post on the astonishing discrepancy between real estate values here and in the States. (By the way, I chuckled all day as I saw realtors and house-humpers attack the chart showing average Canadian prices and median American ones. These folks need to get out more.)

You may have noticed the gap narrowing on Friday, thanks to the Canadian dollar collapsing another cent. In a scant period of time our currency has lost an astonishing seven cents against the greenback, and it now looks like there’s more peeling to come. This instantly made Canadian real estate more affordable to Bill Gates and Lady Gaga. For Canadians, not so much.

This dollar thing is of great interest. Also on Friday came news that the economy grew in the latest monthly period (a surprise) and is now expanding at an annual rate of 2.3%. Not bad compared with America or Europe. But despite that, the loonie bled to death when such news should have bolstered it.

Why? Commodities. The price of the stuff that supports this economy – oil, base metals, wood products and precious metals, for example – is cascading lower. Oil is back below $80 a barrel, almost 30% lower than a few months ago. Gold has lost $300 an ounce, which is a bitch if you bought on the taunting advice of the metalheads who once came here (now too embarrassed). Copper – demand for which is considered a bellweather of economic growth – has collapsed.

Because Canada’s a resource exporter, with a stock market heavily weighted in mines and energy, our currency’s being laid low as global demand withers and economies flatline. Add to that the fact worried money flies into US dollars as the safest of havens, and the value of both commodities and the loonie suffer.

Of course, a 95-cent dollar is a heckuva lot more positive for exporters, tourist operators and anyone who sells stuff into the American market, than a dollar at $1.06. But with US demand weak and falling, and the absolute turmoil of a presidential election year looming – when the most powerful guy on the planet will be hobbled and skewered daily – there’s no reason to expect change. America could likely spend a chunk of 2012 in recession. Since we sell 70% of our exports there, currency traders are cutting the loon loose.

What does this mean on your street?

Well, a dollar that loses ten per cent of its value is not a good thing. Imports get more expensive, and food will take the biggest hit. Inflation will be pushed higher, and we will get a lot closer to the Bank of Canada budging rates higher. But more profoundly, falling oil and metal and lumber prices hurt the whole economy, costing jobs and halting new investment – most notably in the oil sands industry.

Falling national income is not a positive. Combined with record household debt levels and a near-saturation of real estate ownership, it suggests we’re closer to reversing house prices than at any time since the autumn of 2008. As I said here some days ago, this is now the most dangerous asset class in the nation.

Stocks and bonds, preferreds and REITs, small caps and big caps – they may all gyrate and take skill to master. But they’re liquid. Tradable any time. Saleable in 15 minutes. Turned into cash in three days. And destined to pay handsomely when the buds come out again.

You may have noticed the gap narrowing on Friday, thanks to the Canadian dollar collapsing another cent. In a scant period of time our currency has lost an astonishing seven cents against the greenback, and it now looks like there’s more peeling to come. This instantly made Canadian real estate more affordable to Bill Gates and Lady Gaga. For Canadians, not so much.

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Garth has been KIDNAPPED !!!!

Send out the Military !!!

Cryptic certification re: authentic Garth certification is always mentioning “exploding nipples” in Garth’s sermon to the great UNwashed and over=leveraged ….( and Lady Gaga as well ).

Well if Carney would raise rates to where they should be and begin to pull down the cost of shelter, young couples who have been saving might have a chance. Right now, you’re creamed if you save and reaching for bubbles if you buy. Both extremes caused by monetary policy in my opinion.

The peak gold price this year was CAN$1856 on September 2. The current gold price is CAN$1706. It’s down CAN$150 from the peak. That’s an 8% drop in September after a 31% increase in value (from CAN$1419 to CAN$1856) since the beginning of 2011.

Is that really such a big crash? In the more volatile asset classes, such short term corrections are normal and expected. In the last 7 years of plotting the gold bullion and stock investments in my portfolio, I have counted 28 significant corrections. Some are minor while others are free-falls. Some last days while others last months. And through them all, “geniuses” were advising me to sell gold.

Garth, you seem to have an irrational dislike for gold and take every opportunity to bash gold investors. This, of course, is a very good sign. It shows that not everyone is on board yet. You are my official contrarian indicator. I will know it is time to sell the day you say, “Well folks, increasing your gold holding at this time would actually be a good idea given the latest unforeseen events…”

Read my books. I have consistently recommended a gold position – ideally of about 5% with consistent profit-taking to maintain that position. Had you followed this, you would been a happy person. I am. — Garth

Gold has lost $300 an ounce, which is a bitch if you bought on the taunting advice of the metalheads who once came here (now too embarrassed). – Garth

Garth,

For the record. Even if you started buying gold in the July. You would have gained 8% this quarter. All the other precious metals and base metals were down double digits as was equities which saw their worse decline since October 2008.

Anyone catch that little tirade that Jamie Dimon made agains Mark Carney. Interesting how a central banker that worked for Goldman for over ten years has to get an ear full from someone who thinks that bank regulation is “un-American”. A sign of things to come in the world of finance? Perhaps, and perhaps all debts do need to be paid……..even if you are “too big to fail”

Today’s Toronto sun financial section had me laughing my ass off. It’s a must read. Rent to own is a good idea since prices are so high, it goes on to say it will be the new trend. Do people actually believe this crap? Thank god for the sunshine girl. The rest of the paper is a waste of time.

Its been confirmed that BOTH the American economy is going into Recession and the Chinese economy is beginning to Deflate too, so what does that mean about Canada?
Oh wait, of course, “WE’RE DIFFERENT THIS TIME”, so that means our houses will continue to rise to the moon in price, right?

You know, some people (like my neighbour) actually believe that !!!

I’m sort of one of those Gold bugs and yes I’m embarrased at how fast Gold has fallen. I remember reading a chart of how the price of Gold closely approximates the level of American Debt. I don’t know if this is a temporary pause in the price of gold but frankly I don’t think so, I think that with a recession coming that Gold will continue to fall. But then again, i’m no expert so I’m just guessing here.

Yes, that’s true, WHY IS IT that Carney isn’t raising rates now that our Canadian dollar is low enough to allow him to do such a thing.

I remember when it was $1.06 he said that he couldn’t due to the high Canadian dollar. Well, the dollar is low now, shouldn’t he begin to raise rates now to combat our problem with runaway inflation ??

Oh wait; we’re going into a recession. Nobody raises rates at the beginning of a recession, normally they LOWER RATES instead. So does this mean that in a few months Carney will begin to LOWER CANADIAN rates?

Keep your powder dry. The markets took a bath today as did commodities. Greece and the whole EU structural dysfunction is headed for a climax (exploding nipples possible). That should present an exceptional opportunity to buy both stocks, yellow metal & comodities.

If The Fed decides to keep interest rates low, that is QE as they dont stay low by themselves, The banking Cartel knocking down PM’S so they can keep printing money can only last so long, its a long race. if countries around the world continue to be on the brink of bankruptcies and central banks continue to print money like mad and keep interest rates low there is only one place to be, all markets are rigged now, get out of the matrix.

–
“. . . the razzberry to that Key Marketing nimrod all that HAM hype of last Spring in Global TV had an orgasm.” — Global TV frequently has orgasms. That’s all they do, as they’re a bunch of doozy dipshits when it comes to reporting news (no pun intended).

“We’ll all get more interested in it as the body count rises.” — Like this?

Interesting that with zero sales in West Van, the word ‘collapse’ was used a couple of times in this column. No one knows what tomorrow brings, but it goes with Kelowna Food Bank #160 ballingsford — “Scary and uncertain times ahead!” is accurate. The KFB has been excluded from funding — prov. govt. cutbacks — so TPTB are really turning the screws on folks, using govts. as their springboards.
*Rupert Murdoch Y’all know that Murdoch shut down the News Of The World recently. The Sun is its’ sister paper, and is quite anti-union. Collision course for UK and this — Makework Jobs. Just the same as the US after GD1. WW2 followed on to kickstart the western economies, but the water is flowing out of the bathtub now; California “We’re gonna start building gallows!” wrh.com. Hang ’em high! Over 700 Pilots join Wall St. protests, plus the Teamsters; Bank Fees More fees, more taxes, etc.; Short Sellers “Unrestrained financial exploitations have been one of the great causes of our present tragic condition.” — President Franklin D. Roosevelt, 1933.

A very good friend has basically ridden the wave in the Van real estate push and has been rewarded beyond his wildest dreams. Each deal gets bigger and more expensive. He now has a 4.5 m showpiece spec house in W van for sale. He just needs just one hero to lay it down, but boy, does he need it yesterday. I can’t imagine someone shelling out right now over 4 mil and 1200/mo in property taxes just to live in lower W van. A beautiful pad for sure, with every high spec upgrade , but he’s climbed the ladder and know’s that holding this place more than 6 months would be painful….interesting to see if some wing nut saves him.

Not sure where Gold and silver are going in the short term, could go down to around $1200 and $20 respectively. But, with the uncertainty in the world, and the fact hat many goverments and individuals around the world still see gold as a safe haven and money, it’s very likely that we’ll see much higher highs in the long term.

Chew on this.

Even with gold down $300 in the last 2 months (about 14% – much the same as over investments and less than the TSX) It’s still up 13% the last 6 months and over 23% the last year.

Friend of mine went to the grand reopening of BC Place. BC lions vs Edmonton Eskimos, medium pop-corn only $9.50, guess they’re trying to pay off the $550 million dollar renovations in one night.
Definitely not the best place on earth, I mean that’s just silly, but quite possibly the most expensive place on earth, that is until real estate corrects.
Than again if you stupid enough to pay half a million and up for a condo, you probably stupid enough to pay $9.50
for pop-corn.

Good post Garth.
But as you know quite well, RE is a very localised phenomenon. National averages and prices in a city don’t mean much e.g. West Vancouver cooling …Surrey hot…Richmond cooling…Langley hot… etc and I bet similar activity across cities in all provinces.

Sure enough eventually, we will see RE values deflate but I think your call over the last few years that RE is going to go down …has not been much of a success.
And to keep moving the goal post doesn’t add to one’s credibility.
Investors who followed your line argument have perhaps lost.

In between your RE ideas, you mention about stock market investment options and that is good and we appreciate that.

Rather sound like a broken record on RE future, perhaps
it is time to start a blog on a different topic.
What do you say?
I’m not a realtor.

[Insider Report: Richmond new development Quintet hired fake buyers to feign interest]
Richmond Realtor Wei Lu was attended a RE luncheon today and had some RE discussion with her colleagues. She later posted on the forum:
“pre-sales of Quintet (behind the London Drugs on #3 Rd) was met with strong resistance from realtors, because the development was found to be deceptive, hiring fake buyers at @ $50/hr to stand in the pre-sale office feign interest.”

I am by no means a Dalton McGuinty supporter/promoter, but this constant barage of outright lies from the Federal and Provincial Conservatives is insane… I thought that princess John Baird and his golden “I’m not Canadian” business card fiasco would have been the worst story of the week — apparently I underestimated Harper’s other goon Flaherty.

This metalhead is not embarrassed. I’m relieved to be holding gold as nothing has changed. Massive increases in margin requirements seem to be the primary reason for the move. CME hammered down gold just as they hammered down silver. Don’t forget about copper, down for the same reason. Why look someplace else when the answer is right in front of you?

In addition to the boost in margin requirements in these three metals, consider the possibility of troubled European sovereigns dumping reserves, or troubled hedge funds in desperate liquidation mode, selling the one thing that’s up huge on the year: gold.

Is Benron still printing like a mofo, running all kinds of paper games? Yup. Is there currently a global epidemic of money printing? Yup. Is the global debt crises approaching meltdown mode? Yes, once more.

If it ever gets to $800/oz. I’ll admit I got it wrong. Isn’t it interesting how something can take a $300.00 hit in a couple of weeks and still be the second best performer since 2001? After silver, of course.

How about a bet, Garth? If gold hits $2000/oz some time between now and 01-Jan-2012, you send me a copy of Money Road. If not, I’ll send you a copy of my book.

If I’d bought gold in October 2006 ($600 oz), I’d be sitting on 270% profit today ($1623 oz). The TSX then was at 11690, today it’s at 11462, or -2%. Go back over ten years instead of five and gold has made 600% to the market’s 66%. I know gold doesn’t pay a dividend, and I’m no metalhead, but as my teenage daughter would say…just sayin’.

I’m no realtor but know enough that there is indeed a big difference between median prices and average prices, same goes with salaries. Especially in the US, where wealth is much more concentrated then in Canada. I’ll bet the Median US income is significantly less then the median CDN income. The incomes of Buffet, Gates, and Lady Gaga would probably push that avg income up quite a bit. We have a much more egalitarian society in Canada. You will also have many more homes in the US that sell for 10s of millions of dollars then in Canada, and of course I mean on a per capita basis. not sure why Garth just pooh poohs the comments on this, they are valid.

Report back here Sunday afternoon with your anecdotal evidence. City/location/house type. Asking price. Price you’d be willing to pay. “Witty” or otherwise pointless remarks from the selling agent. Number of other patrons observed at said open house.

“Gold has lost $300 an ounce, which is a bitch if you bought on the taunting advice of the metalheads who once came here (now too embarrassed). ”

Ummmm, nope, sorry, I’m not embarrassed. Remember Garth, I still got another few weeks for my predictions of a big honking downturn to happen. Although it looks like I’ll be eating my words and buying more of your books I still think gold will get up to $5000, minimum. It will go down to around $900 at the most then climb back up, silver to. Metals are in a dip, buy now.

Greece is going down, the Euro will go bye bye, we’ll have a big shock on the world markets, a collapse? Maybe, if the herd panics. I think as soon as Greece goes under that real estate in Canada will take a plunge, a big plunge.

I’ll be voting in the Alberta provincial election on Saturday, I hope Gary Mar gets crushed.

With the Loonie tanking the BOC has some room to raise rates. Need not be much – marching towards a 1% increase in the next few months would be sensible.

Letting the air out of the RE bubble slowly is the likely course of action.

In their dreams.

The fact is that the air is rushing out even with tiny interest rates. It is rushing because the leading edge boomers have figured out that the race to the exit has begun. What they have not figured out is that the prices of three years ago are not going to move the family manse.

Here in the leafy Uplands my next door neighbour just listed at 1.89m. The offering, 2 bedroom, 2400 square feet with an obstructed ocean view. He is 800k high. Amazingly, so far as we can tell, no one has dropped by to have a look around. There are five houses on our, very leafy indeed, block for sale. And another one has been rented. And we know of two others ready to go.

The wrinklies want to cash out.

But at those prices there are no buyers. The hams are jumping off buildings rather than facing their grey market (read loan shark) debt. They are not going to be buying 1.89 mil cottages.

I just bought an old family property in a small village on a hill with 3 acres of land and all kinds of agricultural possibilities. Lots of fruits trees and the possibility of having my own bunker with the actual land to do what is needed to survive..

I did this in Switzerland for less than 250K and a mortgage rate of less than 1%….so a carrying cost including taxes and maintenance of about $700 a month….

Point of doing this? I have finally succumbed to Garth’s bunker strategy and was actually in a position to do this…This is also the reason I went short on gold (GLL) about 10 days ago….

While the world will not end…things in Europe are not nearly as bad as they appear on MM (I live here and see the incredible prosperity) but if I am wrong and the world does end…you can enjoy eating your gold bars while I trade my fruits…for veggies, ammo and maybe even your house? Whatever fruit I don’t need because the world doesn’t end :-) I will give to the neighbour who then distills it for me into fantastic fruit schnapps’ which we then give away to friends. Schnapps also holds forever and if the world ever goes down the hole that some of these gold bug nuts say…then schnapps and toilet paper will be worth more per kilo than gold…

And as a Canadian living abroad and seeing what is happening in Canada…and that you are about to spend insane amounts of money going down the road that felled Mexico and the US…..

In Zürich they just started selling small amounts of pot legally at city hall in a pilot project…intent is to register and educate instead of jail…

The Canadian underground pot business probably contributes more to the GDP (through secondary spending) than many “legitimate” businesses…add this to a slowing commodity base, increased ageism…and my suggestion would be the opposite…get rid of the old sycophants and start focusing on those things that really matter…prosperity, low taxes, and opportunities for all…

Well I’m a metalhead and I’m still here, the fat lady hasn’t sang yet, there is a serious market manipulation going on with metals, and the smart money always buys on the drops. Besides, the fundamentals are still very bullish for metals.

amazing how printing money didn’t solve all our problems. I’m still waiting for the perp walk on wallstreet. There’s a reason why they used to cut off your hand for stealing it was to stop you from doing it again.

Sobey’s has been releasing their un-unionized experienced workers in favour of less experienced lower paid employees.

My dentist also recently fired all of his employees (non unionized) and offered all of them their jobs back for $5-15 less per hour, depending upon what they were making prior and what the dentist thought of their job performance.

It is amazing what a disgruntled worker will tell you.

What a great way to reward loyalty, and improve moral at the workplace.

Australia has been faltering for months and China is on the verge of implosion.

This week, it was reported in the Chinese media that 28 “prominent businessmen” have disappeared recently while their companies were left with ‘very significant debts’.

Wanna bet some of that money became HAM to be buried in VAncouver and Toronto RE?

Other odd reports are of several more having committed suicide as they were unable to repay loan sharks. The loans were taken out at MONTHLY rates of 2 to 5 % and used to speculate on RE, specifically condos in Wengzhu.

Guys and gals, you are about to witness what I believe to be a fast ‘correction’ in Canadian residential RE, truly the “last man standing” in world residential realty.

But, all is not lost, as BPOE, Stevenson and other shameless real estae pumpers, your obnoxious in-laws, know-it-all friends, rude acquaintences, Trump-lites and various and sundry fools all get the come uppance they so richly deserve!

From your Sept 29 post:
“And unless you are willfully blind…it’s not hard to see the economic straits we’re in have already leveled real estate excesses in most of the western world. ”
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I wish I could remember who, but someone once said, “Commodities are the last act in the drama.”
That would explain why Canada/Aussie/New Z are the last ones [developed] to “feel it”.

Further, I think we should be very careful about broader deflation. Governments don’t actually “print money”. They create ledger entries, against which banks can lend and people can borrow.

The problem is, banks don’t wanna lend, and too many people can’t borrow [even if they wanted to].

The knuckleball is contracting credit. People talking about “inflation” seem to not understand that credit is the far larger component of money supply than “cash” – and it’s the credit portion that’s imploding.

It’s called “deflation”.

Get used to it. …coming to a real estate market near you…and a grocery store…and a currency…and a stock market…oh, yeah – and a commodity…

By the way, I chuckled all day as I saw realtors and house-humpers attack the chart showing average Canadian prices and media American ones. These folks need to get out more.)
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I can understand questioning the use of median vs. average when numbers are close enough but when the divergence is Mount Everest vs. the bottom of a Fjord, it’s obvious people are grasping at straws. LOL!

Our dollar has gone from 63 cents to more than par, yet despite our increased purchasing power, inflation has still averaged more than 2-3%. My guess is that a large chunk of this gain was spent on higher priced real estate.

It will be interesting to see how where inflation goes when our dollar drops again.

” stocks and bonds, preferreds and reits, small caps and large caps they may all gyrate and take skill to master but they are tradable”

If Dr. Copper is right only skill you are going to need to trade these is the sell button.

“saturation of real estate reversing of home prices closer that 2008”

Been hoping you were right about this for years now but with financial markets like these I predict the RE dinosaurs like Al Sinclair, Anne Romer et all will have a field day promoting the ‘safety’ of ‘good ol’bricks and mortar’ to the uneducated masses’. Sorry, momentum clearly not on the side of the prudent and informed.

And momentum most clearly not on side with a ‘diversified and balanced portfolio’ at least not yet anyway.

I myself have averaged about 5% a year on my balanced portfolio between 2008 and 2010. Now my balanced portfolio this year is down somewhere between 6 and 7% so my gross gain since the beginning of 2008 is about 8%. Unfortunately my 40% allocation to bonds and my allocation to REITS not enough to save me from decline this year.

Let me tell you how successful and prudent I feel when some uneducated, moneyless ‘gnocci’ puts down his borrowed 20k over same time period on some f^%n condo box in T.O and is now sitting on a 100k cap gain.

The coming real estate collapse would be a great thing…were it not for the CMHC. If this clown corporation were disolved, we wouldn’t be in this (coming) mess, as the banks would be forced to lend responsibly, instead of doling out mortgages for hyper inflated real estate to deadbeats and the financially incompetent. Why should the Canadian taxpayer be (yet again) on the financial hook for the misguided idiots that can’t spell economics? The market is driven by greed and a misguided sense of entitlement, not neccessity. Let it collapse and tell the bloated bankers to eat their greed and explain their demise to the shareholders. I just wish the maelstrom would begin so I can buy a farm. Meanwhile, I’m content making 60+% this fiscal, trading rough diamonds…. gold…you have to be kidding.

Deflation has reared it’s ugly head. Has hit financial assets like a land slide. Ever notice how fast and easy it is to lose money in financial assets and how slow and hard the climb back is, at least over past ten years or so into this secular bear market we are in and have been in past decade.

Now what sort of force field has T.O and Vancouver been under to survive the deflationary landslide? Anyone?

Garth:
There is no such thing as “Van West”. Stop confusing people. ; )

To end this madness here it is everyone:
There are 2 areas with higher values than the rest.

“The West Side” is the huge chunk SOUTH of downtown Vancouver, neighborhoods like Arbutus and Shaunessey, for example. Arbutus full of ugly cardboard boxes worth mills and neighbors who never speak to each other. Frankly, it’s an eerie place. Shaunessey is full of “old” money, the real kind, horse farms, real mansions, and front lawns on the Pacific. Streets thread throughout have the same disease as Arbutus, but you get to stick your neck higher if your address is in Shaunessey. This is also the area where Hollywood stars rent or own most often, if not always. Privacy and real properties, as opposed to fake ones, accompany the terrible weather.

The only other “west” anything is “West Van”. Hop north over the water, step on the pathetic excuse for a city that is downtown Vancouver, step over the water again, and you’ll be on the “north shore”. (believe me, only the Jolly Green Giant can get around Vancouver, the gridlock, as a result of the worst infrastructure ever, is a joke. )

So, “West Van” rises up from the coastline, mostly to the left of the Lion’s Gate Bridge, and is full of expensive (nuveau riche), ugly houses built into the next great mudslide. (the north shore is famous for them, Vancouver in general has never been dealing with a full deck). The rest of the north shore, to the right, consists of middle and lower class condos and houses. All residents north of downtown have 3 thoughts over tea though. How the F will I get over one of those bridges today, shite it’s raining again, and I hope it doesn’t rain long enough to send my house down the hill. If in a condo or house on the flat near the shore (where the little people live in snot-nosed Vancouver) only the first 2 thoughts count.

Clear?

Garth. Get your lingo straight. “The West Side” and “West Van” will be spectacular picture shows during the collapse of the market, and of course “West Van” will also be doubly newsworthy during either torrential rains or “the” earthquake. Well, the entire city will be gone if it’s “the” earthquake. The other shoulder of the plate pattern has been planning a whirley for awhile.
I am well aware of the geography, economics, market dynamics and demographics of these two areas. No lesson required. But ‘the west side of Vancouver” requires too much typing. Hence, Van west and West Van. Suck it up. — Garth

Yes, that’s true, WHY IS IT that Carney isn’t raising rates now that our Canadian dollar is low enough to allow him to do such a thing
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Red herring.

Humans are so incredibly linear that they can’t hold multiple equations in their heads at the same time. So for the last 3 decades, the focus has been 99% on 1 single variable: rates. The thought has been that you cut rates and all the economic pieces of the puzzle fall into place. Of course, they never really looked at all the other economic variables that are being stretched to the limit.

Well now rates are close to zero. Rates will increase not because Carney decides to but because the vigilantes says so.

If you keep on focusing on rates, you are not going to be able to shield youself from all the snapping elastics that are about to fly right into your face.

I just bought an old family property in a small village on a hill with 3 acres of land and all kinds of agricultural possibilities. Lots of fruits trees and the possibility of having my own bunker with the actual land to do what is needed to survive
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I’m still trying to reconcile your concept of prosperity for all with your 3 acres of land.

The concept of prosperity for all implies a huge change in the rules of property ownership.

“The problem is on the demand side. Consumers (whose spending is 70% of the economy) can’t boost the American economy on their own. They’re still too burdened by debt, especially on homes that are worth less than their mortgages. In addition, their jobs are disappearing, their pay is dropping, their medical bills are soaring.

I have to say that I am quite perplexed by the recent changes in income levels for different jobs/careers.

For example, blue collars working a real estate related job have been making much more money than many people with masters and doctorates.

What I find most intriguing is that many of those in my finance network who used to make 200K+ incomes are now being offered 100K base and bonus based on sales. And it’s pretty obvious that there will not be much in sales since they will be focusing on restructuring and rebranding. So what I am saying is that their salaries are being capped at 100K while those of teachers (not to mention public servant clerks) with guaranteed pensions and hairdressers are catching up VERY fast.

I really think there will be a shakeout in the financial industry over the next decade but I also fear that this will not be limited to that indsutry.

Therefore, anyone who thinks they work hard for their money and deserve every penny they get should shake that entitled thought form their head if they want to make it safely through the decade. Current salary dislocations across the sectors a showing that many are not deserving of the pennies they are earning.

You’re an idiot.
Garths advice has saved me and hundreds if not thousands of others that come to this blog from having to accept your ‘simple’ way of thinking.
I’ve been a renter for 10 years and everyone I know in BC that bought in the last 3 years is at risk because they have:

a) Little equity,<10%, in an over valued primary home
b) Bought investment condos that are -ve cashflow
c) squandered equity in their home because of the 'Wealth Effect' and thinking they are "Richer Than You Think" (thanks Scotia) and have drained what equity they had through HELOCs.

Compare this to me, a poorly renter of 10 years, well I have only put together:

i) a diversified portfolio that pays me monthly
ii) Moved 3 times for work opportunities that would have limited my career development
iii) Consistently good nights sleep because I don't worry about interest rates, bubbles or debt.

Thank you Garth for all your advice!
You have been correct from the start.
You are the sane voice of the 'Normal' guy out there that has learned to live below his means and live a good life.

Good luck to you Jas, you may not be a realtor but I'm sure you have a high exposure to real estate and probably for one of the a) b) or c) reasons I've mentioned above.

What I find most intriguing is that many of those in my finance network who used to make 200K+ incomes are now being offered 100K base and bonus based on sales.
——–
I forgot to mention that these are the ones who were buying the X5s and selling their 400K houses to buy in Westmount, TMR and Nuns Island for 600K to 1 million.

Study Sees Americans Bearing High Economic Cost of Imports as Labor Market Struggles to Adapt
“There are really huge adjustment costs to local communities that were far worse than people had appreciated,” said David Autor of the Massachusetts Institute of Technology, who conducted the study with Gordon Hanson of the University of California, San Diego, and David Dorn of the Center for Monetary and Financial Studies in Madrid. While Mr. Autor, who specializes in labor markets, receives some funding from the National Science Foundation, this research was conducted independently of any interest group.
The study rated every U.S. county for its manufacturers’ exposure to competition from China, and found that regions most exposed to China tended not only to lose more manufacturing jobs, but also to see overall employment decline. Areas with higher exposure also had larger increases in workers receiving unemployment insurance, food stamps and disability payments.

‘Ontario’s rapid expansion in wind power projects has provoked a backlash from rural residents living near industrial wind turbines who say their property values are plummeting and they are unable to sell their homes’ -CBC

Request To Vancouver Readers – “I’m doing a story next week comparing renting vs. buying in today’s market, and would like to talk to anyone who may have sold their property in the past year or so in order to rent instead.”

So what’s probably going to happen is that fiance people are going to spend less on their hair.

At first hairdressers and/or salons might cut their prices or margins. That,s the delfationary part we are now entering. Government is probably going to do something to maintain some kind of price stability to curb deflation. But with fixed costs creeping up, I’m not sure how much they can cut for margins to drop.

Then when margins drop to zero, salons will start to close. That is when there will be less hairdressers and that’s when inflation starts to kick in.

“Gold has lost $300 an ounce, which is a bitch if you bought on the taunting advice of the metalheads who once came here (now too embarrassed). “- Garth

What he doesn’t say is that to purchase gold now with a weaker canadian $ still puts buyin’ in at around $1700… not a $300 drop.

As the world flees all other currencies and back to the greenback. Its only a short trend…when the rest of Europe gets Greeces, Italies, Ports etc etc fiscal house in order there will be more across the board money printing. Its the only way. This Commidity lag will be short lived….

I would suggest that certain pockets of Metro Van will get harder than others. Out here in the Fraser Valley where I live, sales have indeed been strong over the past few years (with a couple of ‘breathers’) but prices generally never rocketed higher here since the late 2008 financial crises. Markets on the North side of the Fraser (i.e. West\North Van, Richmond, Van, Burnaby etc.) surged. Prices in Surrey, Langley, and Abbotsford have generally been flattish with maybe some modest single digit increases…but NOTHING like the HAM hit areas. We have been witnessing a slow market in Mission\Abby for months now and prices in the Valley relative to the more core suburbs are like 1/3 to 1/2 the price. Because the valley never saw a crazy run up in prices post 2008 I wonder if it’s downside will be more contained relative to the hottest HAM areas which will get hit hardest and fall the fastest. Richmond seems poised to do so once sellers accept that their prices must be dropped to move their product as so many homes there have sat stagnant on MLS for months. Many vendors are in denial. The party’s over.

Hi #23 Nostra, re that link with,
“Tokyo decided to process rubble from disaster-hit areas after detecting only 133 becquerels of radioactive cesium per kilogram of ash generated after rubble was incinerated, far below the upper limit of 8,000 becquerels set by the national government. The central government will foot the expenses of disposing of disaster-generated rubble.”

? I wonder if or how much is not being detected in the ash because it’s going up the smoke stacks into the world atmosphere? The really really small particles can not be captured. Just a thought.

I have to say that I am quite perplexed by the recent changes in income levels for different jobs/careers.

————–

I often wondered why it cost a man $20 for a 20 minute haircut; and why women pay $60+!

I recently found out that a person working the service desk at a car dealership (aka a glorified secretary) makes $80k/yr. I only get 25% more pay and deal with magnitudes more complex and stressful problems. It’s not like the service desk guy has to stay late and work weekends to meet deadlines. After you factor in unpaid overtime we probably get paid the same per hour. I’m wondering if it is even worth it anymore.

…”We all want wise men to give us the secret truth, the real low-down, the inside dope about things – someone who knows more than we mere mortals know,” says writer/director Josh Freed.” But the reality is that many so-called experts don’t know any more than you or me. In fact, a 20-year study of experts shows they’re only right about half the time.”

There are similar findings from other “experts on experts” we meet in the film, like Berkeley Psychology Professor Phillip Tetlock, Christopher Cerf (co-founder of the Institute of Expertology) and New Yorker science writer David Freedman (who’s authored a new book called “WRONG”) . Among their findings – the more famous the forecaster, the more overblown the forecasts, the more wrong they are. “…

So what are the other businesses that have been sprouting like mushrooms during this real estate boom where employees and owhers have probably bought a house and CMHC called them prime, thinking their income is permanent…

#75 Garth’s reply to Bigrider – “My only frustration is watching people succumb to their emotions. It’s why I had mine removed”

Well, a very good reply for sure. I still have my emotions intact unfortunately and yes they have reared their ugly side in this ,yet another market ‘crash’. Lately my emotions have come through in my postings as well. Patience is not one of my virtues either, I have failings, forgive me.

Luckily though I have not succumbed to them either and have refused to follow the idiots plunge headlong into the lunacy that is GTA RE.

Garth, I wish(pray) for the day where prudence and good stewardship of one’s ‘forgone consumption’ is more richly rewarded over reckless behaviour with borrowed/levered money.

Hi Garth, Some might be interested, if they already didn’t know this. Article;
Frankenstein finance: How supercomputers preying on human fear are taking over the world’s stock markets
By Robert Harris Oct 1, 2011
“The trading is mostly done by computer, for which the quants write the programmes. Now, 73 per cent of shares in New York are traded by computer, either by so-called ‘high-frequency strategies’, which may hold the shares for only a few milliseconds, or by algorithms devised by quants. Algorithms are sophisticated programmes designed to predict the behaviour of the markets.”http://www.dailymail.co.uk/debate/article-2043943/ROBERT-HARRIS-How-supercomputers-preying-human-fear-taking-worlds-stock-markets.html

You’ve obviously never heard of “due diligence”.
How in the world do you pick stocks?
Stocks today are a bargain, they sell at a discount.
Any stocks with the right fundamentals can only reward their owners eventually.
There are 1,000s of very valuable stocks to choose from.
Do your homework and stop buying “tips”.
Enron and Bre-X are small exceptions. Buffet sure didn’t buy them. Look at IBM, GE, Goldcorp, etc…
Too many negative losers on this blog. Too bad.

Gold takes a hit and drops $300 and metalheads should feel embarrassed, but what happened to long term investing? If it goes up $300 in a short time then you say its too risky of a play and someone got lucky? Warren Buffett bought a hella big load of shares of Bank of American before it tanked significantly. Maybe he doesn’t know what he is doing and should feel embarrassed too.

Property prices have been inflating for years. Should the prudent renters be feeling embarrassed?

The global economy is deteriorating and Canada’s RE market overall is slowing down in the “low” season. This shows how strong this market is and imagine if times were good. Every other developed country is taking at hit, but international investors are still paying an extreme premium to purchase RE here.

If the loonie is down, doesn’t that mean it’s cheaper for international investors to purchase RE here? Why here in the first place though? hmm..

Whatever people earn, they probably deserve it.
Unless they’re on the taxpayer’s payroll.
I don’t see why a professional or a university educated person would be worth anymore than anybody else.
80% of these so called “pro” don’t have a clue or cannot think outside the box.
Believe me I hire people with more letters after their names than the whole alphabet.
80% of the time it’s a big disappointment.
If someone can make the big bucks good for them.
Again, as long as they’re not on the taxpaer’s payroll.

I guess that you are an EU citizen / resident in that you now reside in Switzerland as best I understand the situation, it is very dificult for a non-EU resident to reside (legally) or purchase land there.

While I realize that Switzerland is not a part of the EU, my understanding is that people with EU passports have a a good chance of being able to locate there, whereas for non- EU people it is very difficult (like Canadians).

I am pretty shocked that you bought a property for that price, as I have been interested in acquiring a small second place in Europe, but always rebuffed by the price and residency issues. I have made several formal inquiries and always found this to be the case.

Could you please give us the benefit of knowing if this is the case.

This is a sincere request and I would appreciate knowing if this was the case.

Btw, I agree with your comments wholeheartedly re Cdn real estate and the impending changes here. Accordingly have been looking for a second place to live part – time and eventually retire to.

“The peak gold price this year was CAN$1856 on September 2. The current gold price is CAN$1706. It’s down CAN$150 from the peak. That’s an 8% drop in September after a 31% increase in value (from CAN$1419 to CAN$1856) since the beginning of 2011”

Couldn’t of said it better myself.
————————————————————————————————————
Garth,

“Gold has lost $300 an ounce, which is a bitch if you bought on the taunting advice of the metalheads who once came here (now too embarrassed)”

?????
————————————————————————————————————
Garth, I get you recommend max 5% PM holding in a balanced portfolio.
I get heavy % PM investment is a vote against the system, yourself and others promote.

What I don’t get, is the obvious, over the top dissing of PMs to the point of affecting ones credibility.
Most blog dogs are already wise to what’s really happening.

No embarrassment on PMs here, You’ve told us this is this is not a gold blog, yet you frequently bring it up. I’m trying to respect your request.

take care,
Blacksheep

An overweighting in gold is no vote against me; just shows you love risk and greed more than prudence and profits. — Garth

THE Australian workforce has become an army of casuals, with employers looking to “shift the risk” of a volatile economy onto workers, according to the ACTU.
More than four million workers – 40 per cent of the workforce – are employed as casuals on short-term contracts in labour hire or as contractors

My only frustration comes from watching people succumb to their emotions. It’s why I had mine removed. — Garth

cannot resist……and with the deep respect:

A testicular cancer patient is admitted to the hospital for an orchiectomy to remove a cancerous testicle. When he wakes up the doctor tells him that he has good news and bad news.
Doctor: Which would you like to hear first?
Patient: The bad news.
Doctor: We accidentally removed both of your testicles.
Patient: What is the good news?
Doctor: You won’t get prostate cancer.

There’s never any confusion when the words “East” and “Vancouver” appear in the same sentence. Most are agreed: Vancouver = delusion and east = dump. Of course this is patently unfair. There are some lovely residences east of Quebec Street (the east-west boundary) and there are certainly a few tarpaper shacks to be found to the west.

However the post by #58 Echo attempting to clarify the confusion surrounding the modifier ‘west’ as it applies to the place name ‘Vancouver’ is incomplete.

Often forgotten is the locally popular ‘West End’. This is a few dozen city blocks filled with aging high rise rental stock occupying the far western portion of the peninsula upon which downtown Vancouver sits.

It has ‘location’ in spades. Close to English bay beach, the stunning Stanley Park yet with easy access to downtown. Mature trees line the quiet streets and rat runners are thwarted by traffic claming barricades at most intersections. Forget Dunbar, Kitsilano and Kerrisdale (the so-called high end ‘west side’ enclaves). The ‘West End’ is the true residential jewel of Vancouver city.

There was a time the west end was the place to be. It still is for some I’m sure but most of the old rental stock is in serious need of upgrade (unlikely any time soon).

Still, it’s a beautiful neighbourhood and I would recommend summertime visitors spend at least half a day walking these streets. Truly, a stroll though Pleasantville.

Don’t drive down there though; Take a bus. Street parking has been impossible in the West End since at least 1965. But that’s actually part of the charm.

–
#13 I’m stupid — Our new neighbors are renting the home for two years before buying. They are from eastern Europe, and maybe they are applying the lessons which they learned over here.

#15 Waterloo Resident — “Its been confirmed that BOTH the American economy is going into Recession and the Chinese economy is beginning to Deflate too, so what does that mean about Canada?”

If they both deflate within weeks of each other, commodities here will be toast. Could be that’s the game both superpowers are playing, to keep in balance with the other.

Meanwhile, back at the ranch, I guess Russia is still in talks with Venezuela to bring in a new reserve currency.

#25 Dan — “Not sure where Gold and silver are going in the short term . . .” — This may help — For the goldbugs here.

#32 Smell The Coffee — “See y’all at the bottom.” — Excellent analogy for maxing TFSA’s out with cheap stocks, as well for non-registered plans.

#48 X — “What a great way to reward loyalty, and improve moral at the workplace.” — and — #64 Moneta — “. . . many of those in my finance network who used to make 200K+ incomes are now being offered 100K base . .”

Precisely, and that’s the way of the western economies nowadays. It is quite unfortunate that these things have to happen.

#63 timo — “This is going to be a long drawn out recession.” — Until TPTB decide to pull the rug out from under our feet. Then it will be like greased lightning!

#74 GregW, Oakville — G’day Greg. Fukushima, and the surrounding area is a complete mess, a lot of it reminiscent of Chernobyl.

It would be better if the m$m and TEPCO reported the figures accurately, but they don’t. This will just have to run its course, then we’ll see what actually happened. Cheers!

Link in War on The Tea Party, It will liven things up for October, and speaking of war — alCIA Quada This new version replaces the aforementioned, just in time for a war with Pakistan and 3:39 clip Sirte, Libya is a disaster zone. Great work, US-NATO! Nowhere To Run A look at how life is evolving in NAmerica; Imploding Good for Rick Perry. He deserves no less; Obanana “Do not underestimate Obama suspending elections to keep the globalist in power.” TPTB have hand-picked each US prez. since G.H.W. Bush. Remember his speech on the NWO?

Compliance with IRS financial disclosure rules intended to nab U.S. tax evaders in Canada and the dual citizens
Why would sifting throught the ten of millions of accounts to find U.S. customers difficult?

The Maps Descriptive of London Poverty are perhaps the most distinctive product of Charles Booth’s Inquiry into Life and Labour in London (1886-1903). An early example of social cartography, each street is coloured to indicate the income and social class of its inhabitants

Vancouver SFH prices looking a little shaky. I’m starting to get excited here. Looks like the CMHC rule changes had some impact after all as the high end gets wobbly. Where are the Chinese with bags of cash?

just got back from walk in West End in Vancouver ( think The Beaches, with more lululemon….). Open House by a very good friend, an honest and very successful Realtor.

He has had 4 Opens, dropped price twice, and he has had exactly Zero interest. Had a java and we talked about his 29 year career. “I’m done – I’ve been blessed, he said, ” but this market is muerte amigo, and when this sells, if it ever does, Maui here I come”.
I asked the obvious, why?

“This market is in deep trouble. I have been watching people signing docs that mean every few years they will be sending more money to the Bank. I bite my lip, because I sell, that doesn’t mean it doesn’t bother me. I have actually talked people out or at least down – I’m exhausted and there are going to be millions lost in the blink of an eye. Nothing is selling.”

If there exists any doubt in your mind that we are still ruled and controlled by European monarchs:

– Harper slavishly re-naming to Royal Air Force – nope this ain’t Canada it never was.
He will be rewarded greatly. Sir Harper down the road, maybe?

– Minister Baird scrubbing the word ‘Canada’ from his business cards in favour of a gold emmbossed royal crest.

– Check the back of your coins – what great Canadian’s face do you find? None.

– Our current rulers, House of Windsor are not British but are in face German. they changed their name post WW1, likely to hide their deed.
This makes the official WW2 story even more curious. Just who were we fighting…what tribal feud were we dragged into?
V is for Vendetta not Victory.

#58 Garth:
No one has ever called it “the west side of Vancouver” . It’s just called the “West Side”. That’s no longer than “West Van”.
(and I didn’t make any reference to your knowledge of anything else, you know that I know that you know the facts re the other subjects. : )

So, stop confusing people with a new reference out of the cloudy, grey, sky. “Van West” has never existed, and never will.

That’s ALL I’m trying to say, as well as prevent unnecessary confusion. : )

On a bit of a different note, what do you think about owning land? Not a corner lot in a city, but actual farm land?

My father is retiring in about 3 years time and he is giving his sons (me and 3 others) the option to buy his 13 quarters of farmland in SE Sask for about 1.2 Million. Do you think land is a good investment? I have no intentions of farming it, but would like to rent the land out and use it as a future investment.

#95 Mister Obvious:
Sorry about that, I didn’t mention the West End for 2 reasons:
1) It’s very small.
2) As you said, it consists of old school condos, but is also mostly rental apartments. We’re talking about the impending real estate collapse here and the “West End” will be least affected.

So, I was trying to clarify the areas involving relevant properties. Yes, I used to spend a lot of time there, rollerblading or in the park and along English Bay. I was almost killed a few times while cycling or blading in Stanley Park inside my designated lanes because of idiot Vancouverites walking in the lanes instead of on their own paths but hey, that’s here nor there. ; ) Just a other famous and chronic footnote about Vancouver. It’s every active person’s dream to round one of dozens of blind corners, even slowly, only to be wiped out by someone with an IQ of 30. I’m saying this because this issue is rampant. Oh, and English Bay is full of feces from cargo ships. Swimming is great! : ) How’s that controversy coming along? Did they fix those bad habits or was it swept under the rug again?

Yes, if someone wants to live in that rainy, cold, only warmISH in summer hole called Vancouver, I agree. Rent an apartment in the “West End”. Until they put a physical barrier between wheels and people (who can’t follow simple instructions like in every other civilized city in the world) I’d stick to the grass in Stanley Park.

Finally, if you want to go anywhere in a car, good luck. The West End is the apple of the infrastructure hell’s eye.

Pick stocks you say ? Have you looked at correlations lately or have you just recently crawled out of the 80’s?

On any down day 95% of all stocks are trading down and on up days 95% trade up. Diversification among countries is a mute point as all markets either trade down or up given direction of DOW and S&P. Buffett hasnt made money for shareholders in over ten years as he has been a victim of this horrid stock market as well.

Tips? Where did you get that idea. Again can you read.
I dont buy tips but here is a tip for you, stop making assumptions.

Again , I sure hope you are right but if markets continue there downward spiral and if (not saying we will or wont) we see another 40% drop from the recent peak, that will make three such drops over a ten year span. I can tell you that we have only had three such drops since WWII.

Such a brutal ten year period will, in my opinion ,wipe out all confidence in the financial markets for a very, very long time.

Penpal, I sm fortunate enough to be Swiss because of my father. He emigrated to Canada from here in 70 and Switzerland allows dual citizenship.

It is very tough to come here as a pure Canadian but depending on your resources it is still possible.

If you have an EU passport then Switzerland has signed onto the Shengen agreement which allows for the free movement of people among the EU and Switzerland.

I am happy to provide any assistance and contacts locally if they are required…I am sure Garth would be happy to give you my email address if you ask nicely :-)

Good luck..

Agricultural land here is heavily regulated as it passed on through the family..so I am actually purchasing a family property. There are tons of incredibly inexpensive but relatively remote properties available. check out http://www.homegate.ch Mortgage rates here are almost zero as the SNB has reduced interest rates to zero.

Moneta, property laws do not need to be changed for prosperity. The only thing that needs to change is “einstellung”

Listen people, the last time we experienced such horrific sideways stock markets with huge volatility was the period between 1969 and 1982, 13 years. Essentially S&P was flat over that period ( I Know add in dividends and you squeaked out a return ,maybe). 1982 rolls around and we went into the largest secular bull market world had ever seen, close to 20 years

So, fast forward to today, bear market commenced year 2000, we are currently officially in one (20% from top defines as such) and have been in a secular bear since 2000, 11 years and still going.

Does anyone think that by 2013, 13 years comparable to the 69 to 82 period, we are in a new bull market. Any chance because I think not.

You remind me of the guy who keeps telling the 10 year old kid that he’s gonna to eventually die, then when the kid turns 95 & dies, the guys says “See, I told you so”. Of course, this conversation must have taken place in another real estate market far away in the sky ;)

What are you doing on this blog? You should be out peddling crack, nothing-down mortgages to naive virgins. — Garth

Beauty country and hope that the pain we are starting to feel in Canada and Australia is constrained to the most leveraged.

Aussie Roy spends a lot of his time rounding up stuff and it is very much appreciated – cheers.

My Pleasure Bill

Thank you for your encouragement.

Aussie Update

Is a person who is overly confident about any assets potential return delusional?. If they are and this delusional is shattered, then aren’t those who are calling for confidence to return, just calling for the return of the delusion? How does someone tell when confidence becomes over confidence – delusion?.

Can you interchange the words “confidence” and “delusion”, when you read or hear economics articles?

Try it, sometime.

THERE are a dozen property markets in Sydney, estate agent John McGrath believes.

The main division is between properties priced under $1 million and those above $1 million. ”Under $1 million is performing actually quite well and over a million is still the quieter part of the market,” he said.

The property guru divides Sydney’s market according to prices and communities. ”I think there’s definitely communities in which there seems to be less confidence, so it’s not just price range, it’s also around, ‘where is the demand strongest’?”

You’re just as bad as the media, you write a blog and POST it on the 30th of September then say “Not a single detached new home was sold during September on the west side of Vancouver. Until just weeks ago”. Ok, weeks ago, sounds like 2 = puts you back into mid September. Are you really saying “Not a single detached new home was sold during the first 2 weeks of September? May still be a bit down, BUT all your sheep will miss the nice NLP ;) #Justsaying
I said: “Here’s something to chew on. Not a single detached new home was sold during September on the west side of Vancouver. Until just weeks ago, this was arguably the hottest housing hood in the nation.” I guess you’re not real big on reading. — Garth

Moneta, property laws do not need to be changed for prosperity. The only thing that needs to change is “einstellung”
——-
I know I suffer from the effect but in my mind property laws are a product of it too.

A man walks into a bar, notices a very large jar on the counter, and sees that it’s filled to the brim with $10 bills.

He guesses there must be at least $10K in it. He approaches the bartender and asks, “What’s with the money in the jar?”

“Well, you pay $10, and if you pass three tests, you get all the money in the jar and the keys to a brand new Lexus.”

The man certainly isn’t going to pass this up, so he asks, “What are the three tests?”

“You gotta pay first,” says the bartender, “those are the rules.”

So, after thinking it over a while, the man gives the bartender $10 which he stuffs into the jar.

“Okay,” says the bartender, “here’s what you need to do:

“First — You have to drink a whole quart of tequila, in 60 seconds or less, and you can’t make a face while doing it.

“Second — There’s a pit bull chained in the back with a bad tooth. You have to remove that tooth with your bare hands.

“Third — There’s a 90-year old lady upstairs who’s never had sex. You have to take care of that problem.”

The man is stunned! “I know I paid my $10 — but I’m not an idiot! I won’t do it! You’d have to be nuts to drink a quart of tequila and then do all those other things!”

“Your call,” says the bartender, “but, your money stays where it is.”

As time goes on, the man has a few more drinks and finally says, “Where’s the damn tequila?!”

He grabs the bottle with both hands and drinks it as fast as he can. Tears stream down both cheeks — but he doesn’t make a face — and he drinks it in 58 seconds!

Next, he staggers out the back door where he sees the pit bull chained to a pole. Soon, the people inside the bar hear loud growling, screaming, and sounds of a terrible fight — then nothing but silence!

Just when they think that the man surely must be dead, he staggers back into the bar. His clothes are ripped to shreds and he’s bleeding from bites and gashes all over his body. He drunkenly says, “Now . . . where’s that old woman with the bad tooth?”
*
#104 TurnerNation — Curious to see how the House of Windsor and the House of Rothschild are linked. The marriages are all inbred and incestuous!

That’s because six individuals control 94% of all m$m in NAmerica, not sure of Europe. They’ve been redesigned to fool all of the sheeple all of the time, which is an excellent reason to avoid them.
*The F-Bomb French banks may be french toast; Twelve Quotes Soros is #1, and I understand Attila the Hun (or Genghis Khan) is also there; Slovakia Last domino standing before the EU nose-dives into the sea; TARP Chart kinda lets on where most of the money went, as if we didn’t know; No Fence Sitting We are either rebels or slaves; Jailing the wrong people Banxters, Wall St. crooks go free, protesters jailed.

Mile Long Crowd Upset and angry? 9:53 clip First it was Wall St., then Lexington, Ky and now Chicago. The peasants are revo-luting! Tempest Not in a teapot; Double Standard Guns for medical marijuana users = BAD; Guns for Mexican drug cartels = GOOD!

The new border between Canada and the US; US aid blocked “Which the Saudis immediately cover! So, I guess Israel will throw another tantrum that it cannot have its way and torment the Palestinians without interference, and order the US Government to attack Saudi Arabia, spilling lots more American blood into the dust of the oil fields.” wrh.com. This would be the excuse the US needs to invade Saudi Arabia; SArabia, Pakistan and China “Wealth, Power, and Prosperity is Moving from Us to Them.”

Well, all those wise Chinese investors can’t be very happy with the performance of the loonie, seeing as their own currency they use to buy up our real estate is pegged to the USD.

Exactly, but all the real wise Chinese cashed in during the first quarter of 2011! For the remainder, China’s RE market is finally tipping so all the money will return home!

As the MSM news of Asian investors were used to drive the VAN TO market up witout any evidence of real numbers, it will be used as a scapegoat for the downfall!

When all is said and done, smart investors Asian or not made nice profits on RE (asians on both RE and CAD) and got out. No so smart will exit the market with minor losses where we hold on and get taken out the emontional way!

Now you tell me who’s smarter!

China’s problems are going to outstrip little Canada and now popping AUS anyhow with the largest RE bubble left in the world to pop, demand for goods globally (Baltic Dry to dump and stay there for years) all this occuring while the cost of production and labour have shot up 40% in the last 4 years and not enough domestic demand to close the gap!

Deflation is the only thing left to balance the global debt. You better keep your job and be renting.

“Buffett hasnt made money for shareholders in over ten years as he has been a victim of this horrid stock market as well.”

Well, Yes and No…

Berkshire’s stock price has jumped around a lot…

Yesterday it closed at $106,800, call it $107k

As far back as December 8, 1998 it closed at that same price, $107,000.

Since then it traveled as low as about $50,000 and as high as about $140,000.

So yeah if you bought at the high back in 1998 then and held then… no gain in 13 years.

BUT – Buffett’s job was always to increase the true value of the company. Stock price is not the true value, except to those who need to sell in the next 15 minutes.

Buffett meanwhile has increased the book value per share by 153% from $37,801 per share at the start of 1999 to $95,453 at end of 2010 (12 years, it’s 8% per year on average).

It’s not Buffett’s fault that investors were dumb enough in late 1998 to pay almost 3 times book value per share and then in late 2011 are willing to pay only a bit over book value or are dumb enough to sell it at that price.

Buffett has made TONS of money for shareholders. He keeps doing his job, making money.

Berkshire has reported a loss of book value per share exactly twice since Buffett took over in 1965 (2008 a 9.6% loss, 2001 a 6.2% loss)

Meanwhile he can’t help greater fools who over-paid for Berkshire in the past.

Last week Buffett basically told us Berkshire is under-valued and the company is buying back its own shares. But what does he know really?

I mean he HAS presided over the company since it was a $14 stock in 1965 and today it is $107,000 per share but as you say, what has he done for us lately?

I have to side with Echo on this one–since the early 50s’ i have known it as the “west side”
and the west side was considered anything west of Cambie St
Ontario st splits the unit east and the unit west hundred blocks and it appears now anything west of Ontario is being referred to as Van West by realtors and newer immigrants
for me it will always remain the “west side” (i hate change)

In 2000 Their was no Tyler Durden, You Tube was but an idea, Six powerful media corporations own 90% of the information that was spoon feed to the tax farm slaves.
The architects of 911 might have reconsidered the crime of the century had they envisioned You Tube and the way the web evolved.

Controlling our behaviour and shaping our belief systems was as easy…AS 1 2 3
They told us what to eat, when to buy when to sell.

Today: It’s different; computer algorithms do 70% of equity trading. And people no longer swallow what Mansbridge is saying without a quick trip to Google. Hence we live in a fast unpredictable market place and world. Bets are riskier but the opportunities are boundless.

The web is like a universal consciousness consolidator where our thoughts and beliefs systems get challenged not, through an agenda driven media but by crazy drunken people, or straight shooters with certificates hanging in their offices all bloging and trying
to get their agenda and point of view adopted by others

Speaking of Crazy Drunk people……………………

This one is heading to New Orleans on Thanksgiving weekend. On St Patties Day this year I send out a scathing broadcast email to the FanDamily It was a beauty, held back nothing, hence there will be no Thanksgivings No Christmas No weddings no nothing…………..anymore…………

At the start of this new century, Government of United States long-term bonds (20-year maturity) yielded 6.5%.

Today these same 20 year Bonds yield 2.66%.

Let’s examine the math.

In 2000 you got 6.5% per year. That’s a price to earnings ratio of 15.4. You got all your earnings in cash, but the earnings would not grow. It was risk free. You would double your money in about 11 years at this rate. Not Bad.

Inflation was 3.4% in the year 2000 in the United States. So you you got about 3.1% real return, after inflarion, risk free. Not Bad.

Compare to today.

You are getting 2.66%, that’s a price earnings ratio of 38! You will double your money at that rate in about 27 years! Bad, really Bad.

Inflation in 2010 in the United States was 1.50% so you are getting 1.16% after inflation. (At that rate you will double your money in real terms in about 62 years!!) Abominably Bad.

Meanwhile stocks (The DOW) are trading at P/Es of 12, (an earnings yield of 8.3%, which unlike bonds you don’t get in cash but which is expected to grow over time). Stocks are paying Dividends of 2.9%. (More cash than bonds give and meanwhile the rest of those 8.3% earnings are kept in the companies to fund growth). Good, really Good.

My friends, the “math matters” and Bonds will certainly NOT have more fun this next decade. Stocks are clearly the (far) better bet as investments right now.

But fools will do as they do.

Fools will believe “the market” knows the right value for bonds and stocks, and will believe that bonds are not in a bubble. Fools cannot be helped.

“No more Markets Mr. Nice Guy for Wall Street; the banks will be knocking on all those Fed windows again soon. And it’ll be interesting to see how Geihtner and Obama react. Feel lucky, punks? Care to risk your re-election? Or do you have your Wall Street funding lined up as we speak?”

not sure what all the fear is about, all but one of my stocks are up on the year and pay a healthy dividend of an average of 6%
Enbridge
Transcanada
Brookfield renewable energy
Inter Pipeline
Bce
Pembina pipeline
Northland power

to #134 Deano and #87 Eagle Bay – I kept this after reading it on the net some time back (maybe even from here?) and thought it worthwhile. I offer it to you in response to both of you concerning what [good] teachers should make. But all bets are off as regards bad teachers.

The dinner guests were sitting around the table discussing life.

One man, a CEO, decided to explain the problem with education. He argued, “What’s a kid going to learn from someone who decided
his best option in life was to become a teacher?”

To stress his point he said to another guest; “You’re a teacher, Bonnie. Be honest. What do you make?”

Bonnie, who had a reputation for honesty and frankness replied, “You want to know what I make? (She paused for a second, then began…)

“Well, I make kids work harder than they ever thought they could.

I make a C+ feel like the Order of Canada.

I make kids sit through 40 minutes of class time when their parents can’t make them sit for 5 without an I Pod, Game Cube or movie rental.

You want to know what I make? (She paused again and looked at each and every person at the table)

I make kids wonder.

I make them question.

I make them apologize and mean it.

I make them have respect and take responsibility for their actions.

I teach them to write and then I make them write.. Keyboarding isn’t everything.

I make them read, read, read.

I make them show all their work in math. They use their God given brain, not the man-made calculator.

I make my students from other countries learn everything they need to know about English while preserving their unique cultural identity.

I make my classroom a place where all my students feel safe.

Finally, I make them understand that if they use the gifts they were given, work hard, and follow their hearts, they can succeed in life.
(Bonnie paused one last time and then continued.)

Then, when people try to judge me by what I make, with me knowing money isn’t everything, I can hold my head up high and
pay no attention because they are ignorant. You want to know what I make? I MAKE A DIFFERENCE.
What do you make Mr. CEO?

His jaw dropped, he went silent.

THIS IS WORTH SENDING TO EVERY TEACHER, EVERY CEO, EVERY PERSON YOU KNOW.

“An overweighting in gold is no vote against me; just shows you love risk and greed more than prudence and profits. — Garth”
—————————————————————–
Never a vote against you personally, I choose my words very carefully. I ONLY hold 30% of my net. in PMs in a bank. Not as dangerous as I may present :)

Buddy, you need to relax. Lately, you sound like you’re having a conniption. Forecasting market trends is a waste of time. Not even the über pros can do it with any consistency. It’s a self-defeating endeavour, almost by definition.

All you can really do is do some good research and analysis and assess the risks. Then make a call and take some action accordingly. But if you are directly managing your own investments, how you invest is up to you. Don’t blame others for the opportunities you may have missed.

It really helps if you understand how the economy and the markets work. Here’s one very basic, fundamental factor: the money supply. The markets and the economy require an expanding money supply. If the money supply is growing sufficiently fast, chances are good the markets will go up and the economy will follow suit at some point. Now, more money by itself is not enough. You also need velocity (money moving through the economy and being recycled in transaction after transaction). Right now there is enough money in the system to take the economy to the moon if we could generate the demand and wealth to match. If not, we’ll just keep getting massive stagflation until enough debts are cleared and balance is restored and we can begin generating real wealth again.

An expanding money supply is generally good for equites and real estate because both are real assets, and real asset prices tend to rise with monetary inflation, unless for some reason specific assets fall out of favour, like housing in the US, which is undergoing massive deflation right now. Things are really out of whack at the moment, making the entire system unstable and very volatile as the central hackers create more and more funny money to combat what is probably the biggest debt deflation in history.

As for stocks specifically, the last time we had a period similar to now was in the ’66 to ’82 bear market (some people peg the bottom at the low in ’74, depending on how you value the indices). In 1978 Business Week ran a cover story titled “The Death of Equities.” Get the picture?

Economic conditions in ’78 were in many ways similar to today. In ’79 President Carter delivered his famous, nationally televised “malaise” speech. I was just a kid, but I actually vaguely remember it. The US was suffering a crisis of confidence, similar to now. Now, just recently Bernanke says the employment problem in the US is a national crisis. Is history rhyming?

Then in around 1980, I think it was, the bond market almost collapsed due to inflation, forcing Volcker to deliver an economic coup de grace by raising interest rates massively and causing a severe double dip economic contraction in the early ’80s. It was a miserable time. Then in around ’82 something happened. The economy started to recover and the stock market started to go up. What followed was the biggest bonafide bull market in history, even with the biggest one-day crash in ’87.

We’ve been here many times before. Read some history. It may make you feel better. But for your own good, don’t let your emotions or your greed get the better of you. Don’t look at your neighbour. Assess your own financial needs and your own risk tolerance and have the courage of your convictions to act accordingly. And remember, Fortune favours the bold.

“Gold has lost $300 an ounce, which is a bitch if you bought on the taunting advice of the metalheads who once came here (now too embarrassed). ”

Not embarrased, just turned off from the talk of preferreds, bonds, etc. which I wouldn’t touch at this particular time. I feel content with the knowledge that my little portfolio is heavy in PMs and Cash and is extremely liquid. My colleagues at work all have worry lines over the volatility in thier mutual fund portolios. I don’t have that issue, and I am fine with the PM volitility. It will prove to be the right decision over the next few years. I admit the cash I have (earning 2% with the purple guys) is really producing negative returns, but I consider that a short term positon as I will be converting the much of the cash and PMs into Real Estate once the inevitable correction arrives.
PS I bought most of the gold part of my portfolio when it was on sale and the prices had one less digit than they do now.

Cash losing money and gold down 14%, and you’re happy? See how delusion works? — Garth

You’re observations are exactly what I have been noticing. Under this boom, many trades, professions, and business startups have been doing inordinately well based on disposable income or disposable debt (HELOC’s etc. in reality).

Have you noticed that almost any joe who bought a monster luxury pickup (there’s tens of thousands of them), started some business -landscaping, renovation, general contracting, tilesetting, roofing, demolition, catering, cupcakes, – and have ridden this boom to an easy life, contracts and work falling in their laps nonstop. Did we really evolve by the tens of thousands into instant successful entrepeneurs in the 21st century, where the money comes easy?

Can you elaborate on how shareholders make money when Buffett increases the book value of the company? If BH doesn’t pay a dividend, isn’t the only way to realize a gain through the share price going up? So even if the book value goes up 3x, if the share value doesn’t, the shareholder doesn’t make a penny, no?

ZERO homes sold in Vancouver west. The housing crash will continue to get worse across Canada. No wonder RE agents are pooping in their pants and posting all day on this blog.

In our neck of the woods, all manner of tricks are being deployed to dump country properties: one of my favorites is slicing up the lot into smaller parts and then re-marketing the listing at a tiny or no reduction. It still doesn’t work. Two of the three properties we’ve been tracking have been on the market for years. The third belongs to someone who moved to Vancouver. Ouch. It amazes me that Rtrds haven’t moved into the next strategic marketing phase which is to provide soothing “changing market insights while hand-holding” services to sellers still on a historical price high. Dumb money is getting thinner and thinner on the ground. Tighter money is always smarter.

Great post, as usual N. Le M.V.
Re: the article on short selling: no mercy at all for the buy-and-hold whiners. The market is the market as permitted by TPTB. Personally, I think the whole equity/ engineered financial product enchilada is and has been a bit of a joke as the small, retail investor is permanently on the back foot, rarely has access to truly valuable info and there are always legions of insiders and book-cookers ahead of you. We did the fund manager thing in the ’90s and got the hell out because of composting performance. I’m currently in my kiddie pool doing a wee bit of short selling and doing well. Short selling is thriving because it is a legal way to chase cash and oh, can it make cash. It can also stabilize some markets as it slows the elevator’s descent when there is a steep price drop and SS see a buying opportunity.

Great post. Let’s not ever underestimate the true significance of the Baird gold-embossed business card fiasco. His brain fart underscores beautifully the chronic, profligate waste at all levels of government. It is not just another titbit of misaligned taxpayer money. This is money which could have gone towards a real and pressing need. There would be billions more available tax dollars to service need in this country if judgement-impaired fools kept their greedy, ego-stroking hands OUT of the public purse.
“Austerity”…..what champion of marketing psychobabble came up with that gem?

You’re observations are exactly what I have been noticing. Under this boom, many trades, professions, and business startups have been doing inordinately well based on disposable income or disposable debt (HELOC’s etc. in reality).
————
I have mentioned it a few times to people around me and their answers are usually the same… that there is absolutely no reason why an educated person should make more money and that I am an elitist….LOL!

A lot of the recent wealth is HELOC made and those who are blind to this will get side swiped.

I have actually just retained a business consultant in your country and would be very grateful to communicate with you on the realities of life there (have visited many times, but being a tourist is vastly different from ‘living’ there) as a former Canadian.

Perhaps Garth could put us in touch.

I appreciate your information and I would very much like to email you confidentially off-blog if that would be ok with Garth.

“A recent executive compensation report from Ontario Power Generation (OPG) shows it is on track to pay its CEO a lifetime pension of $720,000 annually or $60,000 per month or $2,000 per day starting at age 65. Assuming an average lifespan, the CEO will collect total pension payments valued at about $17.6-million. Various other executives at OPG are shown to be eligible to receive pensions of $490,000, $330,000 and $310,000 per year according to the OPG report.”

I think their work is very hard but teaching has always been seen as a vocation and economics does play a role.

Let’s say a student in enrolled in a college and pays 5000$ in annual tuition fees (usually lower BTW). If the course load is 10 for the year. That means 500$ per class. A least half fo this amount is going to support the overbuilt infrastructure. This means 250$ for the teacher. If there are 22 students in the class, then 5500$ is leftover for the teacher and a full time teacher with a course load of 4 should expect around 45K. Notice how there is no extra money for pension and benefits!!!!

We know that government probably pays 50% of the cost so that would bring it to maybe 90K.

I know a 35 yar-old grade one teacher making more than 75K with pension and benefits. That most probably brings her total compensation above the 90K mark in today’s low rate environment.

And classes with less than 25 students is an extra burden on taxpayers.

Low rates and guaranteed pensions are probably our biggest issue right now as taxpayers.

For those of you in the upper hierarchy I have a suggestion for you. Unload the mansion, buy a small bungalow fake a sore leg and buy a Cain, lose the Austin Martin and buy a pick truck with roll down windows, air condition is ok. Stash your cash and keep a low profile………

Instead, a few words following up on yesterday’s post on the astonishing discrepancy between real estate values here and in the States. (By the way, I chuckled all day as I saw realtors and house-humpers attack the chart showing average Canadian prices and median American ones. These folks need to get out more.) – Garth Turner

The graph does tell an interesting story despite that it compares median US prices against average Canadian prices.

The graph does tell an interesting story despite that it compares median US prices against average Canadian prices and appears more dramatic than the reality of it.

The actual graph used in the BMO Report (Focus a Weekly Financial Digest) – which uses averages – is less dramatic to be sure, with US and Canadian house prices following a fairly similar trajectory up until 2005ish when those in the US started falling while they in Canada continued to rise. The actual graph used in the BMO report shows currently (2011) a spread of about $125,000 between the US Average house price and that of Canada (Canada being the higher of the two of course) . This is considerably less than the $200,000ish depicted in the graph used in Garth’s September 29th editorial. Still, this does little to undermine Garth’s argument although his warning might deserve some quelling.

What puzzles me most is, to the best of my recollection for as long as I can remember, U.S. house prices have always been enviably more attractive than those in Canada. There was a short time they somewhat surpassed us as their economy ignited quicker than our own in the late 90’s. But prior to that brief period a typical home in the US appeared, all things being equal, to cost significantly less than its Canadian counterpart. The graph does not go back further than 1999 and consequently that period where it shows Canadian average prices being higher comes across as more of an anomaly than it actually is

I tried, unsuccessfully, to find a graph with more historical data supporting my recollection that prices have historically always been higher in Canadian than the US. Nor could I find one which refuted my recollection. Many of you must, I am sure, concur with me as I recall a time in the early days of my real estate career when many snowbirds were buying Phoenix properties for what looked like bargain prices then too. In my own younger house horny years I often envied those US prices – until my wife reminded me their wages too were generally lower.

It wasn’t until 1999 as evidenced in the BMO reports Chart #4 “Ratio of House Price to Personal Income” that the US left its path alongside that of Canada. In 1999 US house prices began gobbling up more of US paychecks (paycheques in Canada) until 2005 when their economy began to fail. Right now in the US homes are extremely affordable – for those who have a job. Credit is not quite so readily available now in the US and many who were afforded the opportunity to buy homes they really couldn’t afford from 1999 to 2005 are losing them as they are added to a swell of inventory. This is the consequence of a bubble caused by loose monetary policy the likes of which we never saw in Canada. Yes we had loose credit but not nearly like they did in the US. Consequently we in Canada are not likely face as severe a correction.

We may see some continued erosion in Canadian house prices but that erosion will be significantly less dramatic than the graph used in yesterday’s editorial might compel you to believe inevitable. It is a safe bet that the US average house price will begin to rise before those in Canadian ever do. When that happens we can expect that very shortly there-after, at the very least, Canadian prices will begin to slow their decent as they ready to commence rising once more, never falling below their comparable US counterparts.

When you consider this the graph used in Garth’s blog post ObsessionSeptember 29th, 2011 demonstrates only too clearly what they say of statistics; “Statistics are like a bikini, they show you what is interesting but not so much what is important” She could be a he. Now there’s a great idea for an editorial subject and picture…

The chart in question was produced by the economics department of BMO Nesbitt Burns, and subsequently provided to the Globe and Mail for publication. I know, it’s a giant conspiracy. — Garth

A good opportunity may be coming to buy resource stocks or funds that invest in them. Does anyone remember 1999 when the “experts” said: why would anyone want to invest in rocks and trees? If you hear those words again, it’s time to go on a buying spree. Better yet, it will be a good time to put some money into energy stocks or funds.

The chart in question was produced by the economics department of BMO Nesbitt Burns, and subsequently provided to the Globe and Mail for publication. I know, it’s a giant conspiracy. — Garth

We both know it was a stupid chart – an embarrassing error on the part of BMO comparing averages against medians. The correct one still well enough supports your argument that you could have used it instead had it been readily available to you, which I am sure it was not as the report was released on September 30th and your editorial was posted a day earlier on September 29th.

My point is; that chart goes back only as far as 1999. Were anyone to look at the time before 1999 they would see that the discrepancy in US and Canadian average house prices today, that Canadian average prices are higher than the US, is not such a historical anomaly.

CBC: “Ontario’s rapid expansion in wind power projects has provoked a backlash from rural residents living near industrial wind turbines who say their property values are plummeting and they are unable to sell their homes, a CBC News investigation has found.”

Those that have a job do not need a house in the US due to the fact that they already have one. With wages stagnant no one who qualifies needs to buy hence the huge inventory in the shadows.

Canada faces a simple fact the 0/40 and 0/35 has pushed home ownership from 63% to 70% with no thought to who will come into the market to support this growth. Sooner or later your going to run out of qualified buyers and that is not going to help prices in the least. You are either going to have to sub-prime borrowers or open immigration floodgates and qualify them on the application.

Olberman sounds like Howard Beal from “Network”. ” I’m mad as hell and I’m not going to take it anymore”. Within a month or two Mansbridge will be spouting the same diatribe if it improves ratings. L.O.L

Canada faces a simple fact the 0/40 and 0/35 has pushed home ownership from 63% to 70% with no thought to who will come into the market to support this growth. #186timo on 10.02.11 at 10:39 am

I do not dispute your contention that homeownership rates have pushed beyond reasonable levels. While most everyone might want to own a home not everyone should own a home. That effort by the government of the day to make “The American Dream” a reality for so many south of the 49th did clearly seriously backfire upon them. While we too jumped on that bandwagon it was less dramatic here than there in great part because it started there well before it did here and it faltered there enough earlier to give us ample warning of the unforeseen consequences we might incur should we not abate.

The question is not “who will come into the market to support this growth?”. The question, which has already been answered, is; what is the equilibrium level of homeownership. Clearly we have passed it and as with all things economic equilibrium will be sought and eventually achieved. The economic failings we are experiencing are in part due to this “seeking of equilibrium”. As for those additional housing units – in time they will be absorbed for it is in our culture to accept nothing less than growth and grow we will as we have – from 1 billion to 7 billion bodies on the planet in the last 100 years alone a very small time in humanity’s existence. Segway to the “peak oil” crowd.

Relatively speaking, the US is going to rebound well before we do. When they do it will spill over to Canada. By being a follower rather than a leader we are less susceptible to the wild gyrations. By keeping a watchful eye on the elephant to the South we – the mouse to the North – can anticipate our next move so as to avoid being crushed when they fall.

#15 – Waterloo Resident – “I don’t know if this is a temporary pause in the price of gold but frankly I don’t think so, I think that with a recession coming that Gold will continue to fall. But then again, i’m no expert so I’m just guessing here.”

Don’t feel bad, research has found that most so-called experts are wrong most of the time. You have has much chance of being right as they have. All you have to do is listen to what the clowns on BNN and MSM and the Real Estate Guru’s have been nattering about these past three years and you’ll know what I mean.

This blog has been far more accurate on issues as anything you’ve read or heard in the MSM.

I’m “guessing” that there will be demand for commodities in the future and the reason I am going to start investing in them once again now that they are coming on sale. But I’m just guessing.

I kinda like copper stocks right now. So did JP Morgan last December when they purchased 1.5 billion dollars or 80% of available physical supply on the LME. Recently, they have stated that they forecast a shortfall of 200,000 tonnes going forward. I wonder why?

Blase at 158 responded to my post at 133 where I claimed Buffett has made shareholders money.

“So even if the book value goes up 3x, if the share value doesn’t, the shareholder doesn’t make a penny, no?”

Blase you are absolutely right. My point was we need to separate what the companies do from what the stock market does.

Buffett increased earnings hugely and increased the book value of Berkshire hugely and increased its size hugely (he’s Viagra for Berkshire). So Buffett did his job in spades. It was the stock market and idiot investors who bid the Berkshire stock price up way too high in 1999 and now have bid it down too low. The Stock market has failed to value Berkshire properly. But, a little more time please. Now that Berkshire is so cheap in relation to book value it WILL rise in price if Buffett can continue to push the book value and earnings up.

Same thing for the broader market like the DOW and the S&P 500. The earnings on these companies are up a LOT since year 2000. But the average stock prices despite lots of gyrations are lower now than at the start of this century. Well corporate America did its job and made more money. The stock market and irrational emotional investors (is there another kind?) failed to value the companies correctly. They pushed stock prices too high in 2000 and too low today. Give it time. Corporate America continues to grow its earnings and stock prices will rise over time if earnings continue to rise. If we have a recession then it may take another year or two. But ultimately rising earnings push stock prices up. And, normally lower interest rates push them up as well. Stocks are LOW now in spite of low interest rates and high earnings. That spells bargains.

Grown up rational investors (if there are any) will take advantage of the opportunity. But no, there are no guarantees.

Fell outta bed too early, but if it’s Thursday then it must be October, so who’s game for a crash of epic proportions?

Not just RE, this is The Full Monty — everything which was has almost gone now, so let’s have a knees up Mother Brown to wish the old bye-bye and welcome the new in!
*
#161 timo — That’s a good one, and possibly that could happen.

All that does take place is relatively well-orchestrated, so it is quite likely that China is mirroring the US on its way down, they both crash land at the same time then China, Russia and Japan cash in all their IOUs from Uncle Sam.

Right about being small investors getting the short end of the stick, as far as day-to-day updates. I know our CFP visits one or two sites first thing in the morning, to see what’s going on.

I’ll get in touch with him and try to find out some decent sites to visit. Cheers!
*A South Wind Blowing? “You are about to witness a historic event that will be known as the Stock Market Crash of 2011.”; Stagnation Which leads to WW3, plus the cycle change; Greece’s abyss (actually, the west’s).

5:18 clip “Egypt and Iceland taught us all that revolution is indeed possible. It can succeed. An angry populace, tired of living looted lives, can throw out the criminal bankers and the criminal government.” wrh.com and Wall St. Apparently, most of the world is taking note; Libya Someone’s in chaos there, that’s fer sure; Putin – Medvedev Wot’s the dif? Superpower got too big for its boots; Revolting Nations They are fighting amongst themselves, let alone TROTW; Yeeuuggghhhh! Healthy fast-food? Two thumbs down! Coconut Water Has benefits which statins don’t seem to; Mirror Images Not painted scenes, photos.

Good points and largely agree, however I’m fully convinced that people will rediscover their creative abilities to “do” for themselves when it comes to many “services”. Take “Pelo Grandioso” our friendly neighbourhood hairdresser making ~75K. Five years ago, hubbie decided he was fed up with the haircuts at his “executive” stylist. He challenged me to try my hand. I balked, then went off to my friendly local library, got a hair cutting video and tried it. Eureka!! Better haircuts than he’s had, ever. My point is that, if I can cut hair, anyone can. Result? 12 cuts a year X $30.00 (tip included) =$360.00 yummy after-tax dollars saved, not counting gas for the car, time and a lesser cut. Inflation will happen, however it could be very spongy where non-fixed costs are concerned.

Yesterday about 65,000 or about 3% of us 2,000,000 or so elegible Alberta voters elected a new premier, Allison Redford.

Many elections are hardly worth voting in. In a Federal election your one vote has little chance of being a deciding factor for your own member of parliment and about zero chance of being a decinding factor in which party wins nationally and you don’t even GET a vote on who will be Prime Minisiter. (It will be the leader of the national winning party, in which you had no vote).

But, I digress, yesterday’s Alberta election was very much worth voting in.

We got to elect the premier directly. Every adult Albertan could walk in and buy a membership for $5.00 and vote for the PC leader and thereby Premier.

I voted and it came down to a very tight race. Very exciting to watch the results last night. Old guard tossed out. Younger Allison Redford is in and basically all the big Cabinet Ministers had backed Gary Marr. (oops). I hope she tosses out most of them.

Watch for changes in Alberta.

If you ever get a chance to vote for a party leader, do it. As for Federal Elections, frankly, why bother? If you understand math, you know it may feel good, but your vote really does not matter as one individual. Last federal election, I spoiled my ballot as a protest because, none of the above was not a choice. Felt good too. Did I break the law? Maybe. Send police if you wish. Communists everywhere would be proud of such a law.

Based on your experience, does this mean people who work in the financial services sector will ultimately have to pay billions of dollars to keep their jobs? Because they have been making millions for years ruining the world’s economies.

How about the CEOs who have been paid millions of dollars to leave companies after destroying shareholder value? What are we to do with them?

Why would you think that it is “bad news” for bears if the economy does not crash? You think it is more important for people to be proven correct then to keep the equity in their homes and portfolios? You are nuts.

There is a difference between seeing the world for what it is and living in the bubble of wishful thinking. Better to be prepared than naive. You need to learn this.

I agree with your real estate market analysis and comments wholeheartedly. However, the oil sands development will continue at its currentpace as companies are forging ahead regardless of oil price unless of course it tanks to $30 again but I can’t see it. I have been in the oil biz for over 20 years and while companies are ever watchful of the oil price, work is still happening and will continue. The oil patch is very resilient and used to massive swings, nature of the beast so it will go on and there is alot of recruiting going on so jobs are not rare here but depending on skills of course.

Of course, it won’t save the real estate market alone….nothing will at this point.

“In our neck of the woods, all manner of tricks are being
deployed to dump country properties: one of my favorites
is slicing up the lot into smaller parts”

Uh Maxx, It’s called “subdividing” – hardly a trick.

Now as far as pricing goes, a large portion of the value of a residential property is the fact that it provides a building site. Unless it produces something of value, the
additional area is not worth a proportional amount. In my nieghbourhood, a few minutes from town, my half acre is
maybe $175K. Five acres, similarly close may get $250K.

Ever notice how fast and easy it is to lose money in financial assets and how slow and hard the climb back is,

Big Rider the rule when it comes to money is very simple. It is made slowly and lost very quickly. I entered the depression of 1929 with $100 million dollars (google me if you want or read a biography of me) in 1929 dollars. I eventually lost it all and committed suicide. I was one of the greatest traders of all time. If it could happen to me it can happen to mere mortals as well (well maybe not Garth but you get my drift…)

(While somewhat long, this comment was rushed, so I apologize if it’s a bit jumbled.)

I agree with you to a degree. No two periods in history are ever exactly the same, but there are many similarities.

The Fed Funds Target Rate (the source of ZIRP) may have never been this low, but it’s been close. Mortgage rates may have never been this low (not sure) but they’ve been close. The ’70’s and ’80’s interest rates were historical outliers.

Operation Twist was done in the ’60’s. QE became normal policy in Japan. Credit bubble in the ’20’s. Deflation in the ’30’s along with massive unemployment, poverty, etc. Massive government debts in the ’40’s post-war. Dollar crisis and inflation in the ’60’s.

Let’s not discount the affect energy prices have in today’s economic downturn, like they did in the ’70’s. Crude was at a low of about $10/barrel back in the late ’90’s. Going from that to around $100 in a decade would have a huge shock that perhaps most people don’t appreciate. Energy is the basis of the economy (of everything, really). So if real energy costs are high productivity suffers. Thinks back in history when we got most of our energy from the sun, or running water, or even coal. Energy was dear, productivity was very low, many starved.

Watch the movie Network. They talk a bit about oil and the economy in that movie. You’d swear you could lift portions of the screenplay and drop them almost verbatim into a movie today. Especially the famous scene where Ned Beatty gives Peter Finch a lesson on how the world really works. Network was released in 1976.

Fraud and corruption and wealth disparity have always been with us. Insiders have always gamed the system. It’s not right, just saying it’s nothing new. The unions did not stop the corruption, but they did get the working man a larger share of the pie. But this is more a political problem, that again has been repeated often in history. If it bothers you, fight it.

There’s word now that the US gov is planning on allowing major US corporations to repatriate off-shore profits tax free, in order bring the money back to the US. They will use this money to buy up assets (eg RE) at huge discounts. It’s what some claim is the old game of inflate, deflate and steal the people’s wealth.

I agree with you re: demographics, but these issues can be managed with a globally coordinated effort. There’s no shortage of young, eager people in the world today who can become productive citizens. Easier said than done, but it can be done. Like corruption, it’s more of a political problem.

There are two very big, vey important things that I would agree are very different today and for which there is no solution, only a period of adjustment: debt and global competition for resources.

It sure looks like we’ve hit a wall in terms of debt. We spent too much of our future wealth. You can debate the causes for days, and there are many reasons why this happened, but the fact remains the Western world looks like we maxed out our credit card. Without massive growth there will be continued losses as the debt must deflate somehow.

Global competition for resources. Today, the West has to share the planet’s resources with those “other” people, particularly in Asia. If the “pie” does not expand very quickly, there will be less to go around. This issue is huge, perhaps the single biggest challenge we face today. The ramifications may be dire. The first great age of globalization in the early 20th century was halted by the Great War. Some people are convinced another one is coming. Hope not.

Gee , where are all those people that said the HST was good for the economy when its obviously bad for large purchases, ie New Homes/ autos/etc.
The HST is nothing more than a massive tax grab by the provincial govts of Ont. BC and now Quebec ( items previously PST tax exempt are now added into the HST at a 7% increase to the poor taxpayer).
Why is it going to take another 1.5 years to rid the voters of BC of this blatant tax grab? It took the BC govt less than 4 months to ram it down our throats but it wont be recinded until 30 days before the next obligatory Provincial election in May 2013?
Unelected “premier”Christy Clark is an opportunistic buffoon who couldnt debate her way out of a room full of 6 year olds.
Another 1.5 years of her, the HST and the world economic meltdown will gaurantee provincial economic meltdown.
2012 “The Year of the Strike” in BC

Nope, it’s always an honest attempt to let others know the truth about that facade out there, when the BS here gets thick enough, as it does often. It’s direct, accurate, and long overdue. It has never been in MSM, and never will.

There are also many that read this blog that know I’m describing facts about the place that don’t have the guts to write and back me up, which is here nor there to me. This is about one of the biggest real estate marketing scams in history, if not the biggest, and when Vancouver comes down to the level that it has always deserved to be at, the corrupt City Hall included, it’s going to be more than spectacular. It’s going to be lovely to watch. Funny thing is ~ I don’t think it will change anyone’s personality, behaviours, or “lack of humility” disease. It will just make many of them swallow more anti-depressents and withdraw further in.

Now go enjoy Stanley Park. Be sure to stay away after dusk though and if your car is parked on a street in any area whatsoever of the city don’t leave a CD on the dash. You know those stats right Billy? Smash and grab capital of Canada, probably North America.

p.s. And the worst example of racism I’ve ever seen in my life, anywhere, including the States. Blacks in Victoria, Asians in Vancouver.

Now go assume that I’m Asian, or “African American”. Your mind is small enough. : ) Oh, and also take the position that I’m speaking about all people as racist. There’s some fodder for your next attack. lol

@#187 Ben
” I buy myself a doz beer for $11.00 here in Dallas
It costs $3.00 a gallon for gas down here as well, don’t we make the s hit in Canada and sell it to them?
Canada your so f uk ed up and you don’t even know it !”
++++++++++++++++++++++++++++++++++++
From your spelling mistakes I see the US education system is still firing on all cylinders.
I believe we pay more for the beer and gas that we export to the US because we pay more in taxes locally for our domestic beer and gas for crazy things like govt backed Health Care and infrastructure.
Since our population is 1/10 the US pop. but our Country is massive(that means “big” in Dallas-speak) compared to the US we sometimes have to make fiscal sacrifices to keep our country somewhat “on budget” ( hows that $ Trillion dollar deficit working for ya?).
So enjoy driving your Hummer to the Fried Chicken/ Gas Mart and filling up on cheap gas, cheap wings, washed down with cheap beer.
Just dont choke on a chicken bone because the ambulance, hospital stay and doctor’s bill ISNT cheap!

I’m intrigued with how much a teacher is worth so I just did an IRR calculation of it…

We know that a child can go to school from 5 to 22 years of age and he/she costs about 10K per year for this education in 2011 dollars.

I assumed that a new graduate could find a job for 40K and inflation of 3.5% until the age of 65.

Using a 6% cap rate, a net discounted cash flow analysis reveals that future income should be taxed at 22% just to pay back the years of education costs. That’s not accounting for all otehr government in the social net.

However, the average tax rate in Canada at that income level is 15-20%. Therefore, if we want our teachers to keep on getting their 75K+ and benefits, we would need to double taxes or have the average Cdn income double.

There’s a reason why teaching was a vocation for hundreds of years. A shakeout is coming folks.

However, the average tax rate in Canada at that income level is 15-20%. Therefore, if we want our teachers to keep on getting their 75K+ and benefits, we would need to double taxes or have the average Cdn income double.
—-
Or double the size of classes and cut the number of teachers in half….

Good post Garth.
But as you know quite well, RE is a very localised phenomenon. National averages and prices in a city don’t mean much e.g. West Vancouver cooling …Surrey hot…Richmond cooling…Langley hot… etc and I bet similar activity across cities in all provinces.
Sure enough eventually, we will see RE values deflate but I think your call over the last few years that RE is going to go down …has not been much of a success.
And to keep moving the goal post doesn’t add to one’s credibility.
Investors who followed your line argument have perhaps lost.
In between your RE ideas, you mention about stock market investment options and that is good and we appreciate that.
Rather sound like a broken record on RE future, perhaps
it is time to start a blog on a different topic.
What do you say?
I’m not a realtor.
______________________________________________
jas, the only thing hot in Surrey are the bullets flying around in all neighbourhoods due to the gang violence–nuff said about that
the hottest thing in Langley is the debate of how residents are going to avoid the new Port Mann bridge when the tolls are in place—the valley is pretty stagnant and has been for awhile
jas, read #73 Van Metro Observers’ post –he is so much more on the ball than you–i try to follow a few areas in Abbotsford (family) their prices are way below what they could have sold for in 2008–no big run up after the downturn

i think #66 Keeping the Faith pegged you right

PS–the tolls for the Golden Ears bridge(M Ridge to Langley) were recently increased to $4.10 (one way) for pass veh–with a transponder it is $2.90–if you can get one
once the tolls for the new Port Mann bridge are announced, i think that might further dampen the valley housing market –we’ll see

Based on your experience, does this mean people who work in the financial services sector will ultimately have to pay billions of dollars to keep their jobs? Because they have been making millions for years ruining the world’s economies.

How about the CEOs who have been paid millions of dollars to leave companies after destroying shareholder value? What are we to do with them?

Depends who you are talking to Junius. Depends who you are talking to. Clearly they who write the pay-cheque to those CEOs think they are worth what they paid them and thus my argument does stand up to reality because that they did is indisputably a proven fact by your own account. That is not to say the tide will not change and they fire those CEOs sorry asses, but as long as they continue to pay that is what they are worth – to them. It does not matter what you or I might think.

#197penpal on 10.02.11 at 11:59 am
@ # 176 D A

I think it is very telling that the Realturds on this blog have an issue with the BMO chart.

Funny that, because they were falling all over themselves to point out the latest Bank report that they felt bolstered their case for higher RE prices. Now the banks are ‘mistaken’ in their eyes.

My oh my, how things change…..

So here we go again putting words in my mouth. It’s not what you say which matters so much as what they hear.

I don’t think penpal that we are in so much disagreement as you think.

The real issue is affordability. A chart comparing US and Canadian house prices at any given time is not nearly so telling as one comparing the affordability of housing in each country at any given time.

#205The Emperor’s Clothes on 10.02.11 at 1:31 pm
Gee , where are all those people that said the HST was good for the economy when its obviously bad for large purchases, ie New Homes/ autos/etc.

It ain’t over ‘till it’s over. A lot of business will bring forward some large acquisitions that they may recoup the HST (GST and PST) where if they wait they will only be able to claim back the GST component.

A very nice and altruistic post on the teaching (and education) system.

Wish it could be so true.

Unfortunately i think the current education system is a failed system that literally is pumping out undereducated, undersocialized and unprepared kids and that is assuming that they even get to complete their basic Grade 12 education (which an inordinate amount don’t which in itself indicates the system is a failed one)

There are far too many vested interests in the education system and it seems the kids ultimately come last.

I have a daughter in Port Coquitlam who has taken her three children out of the system and has elected to home school them (as has some of her friends with theirs) because the current system has failed to deliver.

When my kids were going to school in Hicksville and taking private music lessons their private music teacher was also a teacher at the local High School as was his wife and believe it or not, they home schooled their own children away from the Public School system even though they were part of it.

No wonder that nowadays everything is out of whack and up is down and white is black and little makes sense anymore.

206 Maxx – yes you are correct that the market will determine the price and speed at which those properties sell.

But you are incorrect in the implication that subdividing
is a “trick” or “ploy”. It has been done in some form for
as long as the white man has settled here, and is at the
core of the development process. Depending on your
locale, it can be a highly complex and frustrating mess of
politics, regulations and bureacracy, adding greatly to
the cost of real estate for everybody (see demographia
studies).

I do hope you gave the example of pricing for rural properties some thought.

Smoking man #212
When they call out the National Guard and have a Kent State moment you might get your wish. Until then your just sounding nuts. I kinda liked your old posts but now your going all conspiracy. L.O.L big time

Did I mention i’m down here because i come from rig pig land where there’s no work for a software geek. Oh ya and if i could find a sfw geek job in rig pig land it might pay 60% of what i’m making down here… did i mention that’s if i could find a sfw geek job?
So not only do i make 40% more, it costs 40% less to live. So take our free 14 hour emergency room wait AHC and shove it cause it ain’t worth it.

Garth you say golds loss of $300 is a bitch.
Can you define the absolute objective value of a dollar?
I would venture a guess that if investors really had gold that they really lost nothing of value as they still have gold which is the source of its own value. The same applies to silver. Paper gold or silver bought on margin is however not gold or silver and has no value and the $300 loss is just a statistic just like the fiat currency its quoted in.

Blah, blah, blah. When I can fill up my Harley and pay for it with a nugget, you win. — Garth

There’s a reason why teaching was a vocation for hundreds of years. A shakeout is coming folks.

……………………………………………………………………………
For my clarification, Moneta, are you suggesting that teachers should teach for no or very little remuneration? That is what vocation means, I believe – a sideline or hobby, not worth being paid much.

If that is what you are suggesting, then I would appeal to your sense of fairness. Our daughter, a primary school teacher, two years ago had a class of 28 grade three students. Eight of those pupils had “individual education plans” meaning that they were unable to learn either at the same pace, or with the same degree of intellectual ability, as the rest of the class. Only one of those pupils was entitled (under the terms of that Board of Education, in the tri-city area of south-western Ontario) to a teaching assistant. The remainder of the special kids, 7 of them, were the responsibility of our teacher daughter along with the rest of the twenty other kids. And by the way, one of those students was a paraplegic and needed toiletting assistance, provided by the teacher, of course.

Now, please tell me again how you see teaching under those circumstances should fall to those with a “vocation” to teach.

Ah, the Saanich Peninsula. Cruising around to horse farms on my classic bike. It took my mind off of the crime in Victoria. Especially after the (nah, THAT’S a crack house???) crack house ridden (pretty) James Bay incident where one of the crack addicts broke in and stole my entire jewelery collection, brandishing a weapon I might add. Very. Nice. Haul. Uninsured. Hadn’t had time yet. As for B&E’s, as common as apple pie. Oh, yes, smash and grabs too. Let’s not forget those. : )

Ah, BC, the facade of all facades. Boy, the cops told me A LOT. ; ) Those Parliament Buildings sure put up a pretty front. lol I believe some of those pretty houses are losing market value now. (and the buyers are clueless about the dirty secrets of the neighbourhood, but of course! It’s BC! ).

Thank God for a great city like Toronto. Overpriced, yes, but that’s it’s only problem compared to BC.

Well, nice, but you forgot to say that West Van is on the big mudhill on the north shore just west and up from the Lion’s Gate Bridge. Kinda unique don’tchya think?

And the Van West thing, come on. lol That’s a marketing thing, nothing to do with the history of the place, so you’re just confusing people. Keep it simple.
: ) We need proper references when the popsicle sticks come a crashing down. it’ll be more fun to have a clear map in people’s heads.

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The views expressed are those of the author, Garth Turner, a Raymond James Financial Advisor, and not necessarily those of Raymond James Ltd. It is provided as a general source of information only and should not be considered to be personal investment advice or a solicitation to buy or sell securities. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor's circumstances and risk tolerance before making any investment decision. The information contained in this blog was obtained from sources believed to be reliable, however, we cannot represent that it is accurate or complete. Raymond James Ltd. is a member of the Canadian Investor Protection Fund.